(I am prefacing this by saying that this is a past assignment I did in my summer Marketing 4000 class and I am interested in seeing my fellow marketing students’ opinions on this subject.)
The grocery store/supermarket industry is a highly competitive, mature industry with total revenues of $607.9 billion and total profit of $12.2 billion. Over the next five years, the industry is anticipating steady growth due to increases in per capita disposable income (see Figure 1) and rising consumer preferences for healthy alternatives, such as all-natural and organic products. Consequently, “industry revenue is forecast to rise at an annualized rate of 1.1% to $642.4 billion over the five years to 2022” (Guattery 2017). Due to low profit margins in this industry, many of the big-name players, such as Costco and Walmart, rely on their large economies of scale so that they may offer lower prices. Also, because competition in this industry is so high, many large national chains offer “big discounts and promotions to drive foot traffic to their stores and strengthen consumer loyalty” (Guattery 2017). In order for an on-campus UGA grocery store to be viable and competitive, it must:
1. Understand the Success Factors that drive the industry;
2. Utilize its already existing relationships with local markets and rely on fresh produce and organic options as well as perimeter products, and;
3. Understand and be able to market to college students and millennials.
In the grocery store/ supermarket industry there are five key success factors: Proximity to Key Markets; Access to Multi-skilled and Flexible Workforce; Ability to Control Stock on Hand; Close Monitoring of Competition, and; Access to the Latest, Most Efficient Technology and Techniques.
The first is Proximity to Key Markets: “A supermarket’s proximity to densely populated areas enables operators to maximize foot traffic and sales. Clear signage, easy access and ample parking space also attract shoppers” (Guattery 2017). UGA clearly has proximity to the largest key market in Athens which is UGA college students. This means that UGA could easily use its location to maximize sales at the new on-campus grocery store.
The second key success factor is Access to Multiskilled and Flexible Workforce: “Similar to other retail industries, supermarkets have a highly flexible workforce, which enables stores to rotate staff as required, particularly during extended operating hours” (Guattery 2017). UGA has very easy access to the multiskilled and flexible workforce that is the UGA student body.
The third key success factor is the Ability to Control Stock on Hand: “Managing inventory ensures that products are always available for purchase, particularly if they are advertised as the weekly special and in high demand” (Guattery 2017). Because UGA has extensive relationships with local farmers, products will always be fresh and readily available. Also, because UGA has great foodservice and dining hall operations it easily has the logistical ability and information to control its own stock and inventory.
The fourth key success factor is Close Monitoring of Competition: “Grocery stores compete on price due to the low level of product differentiation. Consequently, retailers must monitor when competitors offer discounts and promotions” (Guattery 2017). Because UGA is centrally located in Athens and is surrounded by a vast amount of grocery stores and competition it should be easily be able to monitor competitors’ prices.
The fifth key success factor is Access to the Latest, Most Efficient Technology and Techniques: “Operators that take advantage of the latest technology in security and point of sale processing benefit from increased productivity and higher profit margins” (Guattery 2017). As seen by the retinal scanners used at the Ramsey Student Center, UGA has the money and resources to take advantage of the latest technology to allow them drive costs down and increase profits.
UGA clearly has the five key success factors that would allow them to establish a competitive, successful on-campus grocery store. But, how will they take advantage of them?
Because UGA is not a big player in the grocery store industry relative to Walmart and Kroger it must be able to rely on its already existing relationships with the local food markets in Athens. This will help to bring costs down and increase potential profits while also providing fresh, local produce to students. Through these relationships UGA can also provide an array of fresh “Perimeter Products.” These products are: “Food categories found along the interior perimeter walls of supermarkets, grocery stores, and most supercenters” (Owen 2017). These products include fresh/frozen meat, fresh produce, fresh milk/dairy/eggs, fresh baked goods, and prepared foods. Perimeter products “sold an estimated $252 billion in 2017, representing a 15% increase over five years driven by growing demand for fresh ingredients and freshly prepared foods” (Owen 2017). Relying on perimeter products will allow UGA to capture the growing demand for fresh foods, especially among adults aged 18-34. In fact, adults aged 18-34 were more likely than any other age category to buy perimeter products from places like farmers’ markets, local neighborhood grocers, and natural food stores (see Figure 2). But, for an on-campus grocery store at UGA to truly succeed one must be able to understand and market to college students and millennials.
In general, 65% of college students are very concerned about having enough money to do the things they want to do and 61% are concerned with being able cover their own financial situation. This suggests that college students should be targeted with different kinds of price promotions, including coupons, loyalty programs, etc.
Most college students are Millennials. Millennials are now the largest US generational group (24.5% compared to 22. 6% for baby boomers) and the largest percentage of primary grocery shoppers at 37%. Millennials see price and convenience as two of the most important factors to consider when it comes to grocery shopping. 69% of younger millennials say that food fitting into their budget is an important factor, while 28% say it is the most important factor in their purchase decision (see Figure 3). Of younger millennials, 43% want food that is convenient and quick to eat. 65% of this same group would also like to see more promotions and coupons customized to their shopping habits (see Figure 4). Also, 54% of millennials would like a device that scans items as they shop, leading to quicker checkout.
With these statistics we can deduce three important points. First, because college students and younger millennials have little individual purchasing power because they put a high value on price of goods. Second, because college students and millennials are always on the go, they need food that is portable, convenient and quick to eat. Finally, because they are very busy, they must also have an easy and quick shopping experience. For an on-campus UGA grocery store to succeed it must capitalize on these three important factors.
Marketing strategies that can be used to capitalize on these three factors include: coupons and price promotions; a loyalty program for students and faculty utilizing paw points or bulldawg bucks; self-checkout lanes; payment using UGA I.D. cards or retinal scanners, and; portable and pre-prepared meals which allow for convenience, such as sandwiches, wraps, pre-cooked meals in microwave safe containers, etc. Also, carrying fresh local produce, goods, and perimeter products will attract customers and allow UGA to capture the growing demand for healthier options.
Bloom, Beth. “The Millennial Impact: Food Shopping Decisions.” Mintel, Mintel, July 2017, academic.mintel.com.proxy-remote.galib.uga.edu/display/793961/.
Guattery, Meghan. “Supermarkets and Grocery Stores in the US.” IBISWorld, Oct. 2017, clients1-ibisworld-com.proxy-remote.galib.uga.edu/reports/us/industry/default.aspx?entid=1040.
Macke, Dana. “American Lifestyles: Markets in Motion.” Mintel, Mintel, Apr. 2018, academic.mintel.com.proxy-remote.galib.uga.edu/display/860381/.
O’Donnell, Fiona. “Marketing to College Students.” Mintel, Mintel, July 2011, academic.mintel.com.proxy-remote.galib.uga.edu/display/542937/.
Owen, John. “Perimeter of the Store.” Mintel, Mintel, July 2017, academic.mintel.com.proxy-remote.galib.uga.edu/display/793953/.
Smith, Diana. “Grocery Retailing – US.” Mintel, Mintel, Nov. 2017, academic.mintel.com.proxy-remote.galib.uga.edu/display/794145/.